Top Trends in Supply Chain Sustainability

Sustainability has transformed from a buzzword to a mission-critical imperative.

As the world grapples with environmental and social challenges, organizations are reimagining their supply chains to drive sustainability. For procurement and supply chain professionals, staying ahead of the curve is essential.

A recent study from GEP and North Carolina State University of 250 supply chain and procurement leaders from the U.S. and Europe examined current priorities, challenges and best practices in supply chain sustainability for 2023, and the results reveal some key trends that enterprises should be aware of in their mission to balance sustainability, resilience and cost control.

1. Sustainability as a Prerequisite

Investors and customers are no longer merely interested in sustainability; they expect it. Sustainability is now a baseline requirement, and the bar has been raised significantly.

Investment ratings agencies are incorporating environmental, social and governance (ESG) factors into their assessments, affecting an organization's access to capital. To adapt, companies should align their business strategies with sustainability goals, actively communicate their commitments and seek ESG certifications to showcase their dedication to sustainable practices.

2. The Rise of Sustainable Resilience

In a world increasingly vulnerable to environmental and geopolitical disruptions, the concept of sustainable resilience has taken center stage. Organizations are recognizing that sustainability is not just about being eco-friendly but also about building robust and adaptive supply chains. This means identifying and mitigating risks associated with climate change, natural disasters and social issues.

To adapt to this trend, companies must integrate sustainability into their risk management strategies, embracing circular economy principles, sustainable sourcing and resilience-focused supplier collaboration.

3. Greater Transparency in the Supply Base

A core component of sustainable supply chains is transparency. Companies are increasingly investing in greater transparency in their supply bases and engaging with suppliers to ensure ethical and sustainable practices.

Businesses must establish clear visibility into their supply chains, adopting technologies like blockchain and supply chain mapping, as well as utilizing third-party audits and certifications to address potential issues. This helps in ensuring sustainability as well as human and labor rights throughout the supply network.

4. Regulatory Changes Looming on the Horizon

Regulatory shifts are a significant driver of change in supply chain sustainability. For example, the U.S. Securities and Exchange Commission (SEC) has proposed a rule change that would necessitate public companies to disclose information about climate-related risks, including greenhouse gas emissions, placing greater importance on accurate sustainability reporting and measurement of Scope 3 emissions.

Other regulatory developments have increased the need for enhanced transparency in supply chains, including the German Supply Chain Act of 2021, which require companies to comply with human rights, labor and environmental requirements.

Companies must prepare by establishing comprehensive sustainability reporting practices, tracking relevant metrics and staying abreast of evolving regulations.

5. Technology-Enabled ESG Decisions

Technology is becoming a powerful enabler for ESG decisions. Artificial intelligence, data analytics and supply chain management software are increasingly being used to address ESG concerns by increasing efficiency, improving visibility and transparency and optimizing spend.

With real-time insights, companies can make more informed decisions on sustainable procurement, ethical sourcing and emissions reduction.

According to the GEP-NCSU study, the top software/hardware combinations for enterprises include supply chain optimization, blockchain, transportation management systems and spend management systems.

Balancing supply chain sustainability initiatives with cost-control measures is vital.

Sustainability is not merely an option but a vital aspect of business strategy, and supply chain professionals must proactively adjust to the trends. By aligning their supply chains with these developments, companies can not only meet stakeholder expectations but also guard against disruptions and set themselves up for long-term sustainable growth and profitability.

To learn more about what top supply chain and procurement leaders are doing to build sustainable resilience, download the full GEP and North Carolina State University study, The State of Supply Chain Sustainability 2023, available on our Knowledge Bank.